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Takehome:
Chinese authorities are developing a unified information system to facilitate customs clearance, inspection and quarantine for products imported via CBEC channel.
Significant regulatory changes are in the pipeline and when finalized will see CBEC regulatory requirements aligned with general trade requirements.
In early 2016, China released a tax reform and positive list policy to regulate CBEC industry. The authority levied a new CBEC tax rate, set a quota for individual purchases and restricted the commodities that can be imported via CBEC channels. At the moment the importation process associated with CBEC is very different from general trade in terms of taxation, regulatory requirements and general importation procedures. The CBEC bonded import model is the major import model used for CBEC trade. This system allows goods to enter the special management zone of Chinese ports, after which they are subject to customs clearance and inspection when products are ordered by customers via the on the CBEC platforms dedicated website. It requires the authority to monitor all orders created through CBEC platforms.
The development of CBEC Customs clearance systems
Initially, pilot cities such as Shanghai built official CBEC platforms namely Kuajingtong requiring traders (such as Walmart) to open “stores” on the platform so that Shanghai customs can monitor orders. Now, most pilot cities have designated responsibilities to third party customs information management systems and enterprise self-built CBEC platforms. These platforms then transfer order information to customs. On October 13, 2016, the General Administration of Customs (GAC) released No.57 Notice on “Unified Information System for Cross Border Electronic Commerce”. The GAC will develop a unified information system to manage product list, order, payment, shipment list and status. This system is applicable to CBEC platforms, import agents, cross-border payment enterprise, and logistics enterprises which will unify the information collection format in all pilot cities. Presently, the system is still on trial in some pilot cities but could be implemented in all pilot cities by 1 January, 2017.
Inspection and quarantine procedure
Customs clearance problems may be solved efficiently through IT based solutions, but the real challenge for authorities is inspection and quarantine clearance. To offset the burden of increased inspection volume, CIQs will have to develop a series of new inspection procedures and measures to adapt to the CBEC trade process and new positive list restrictions.
On October 18, CNCA released “2016 Forth Batch Establishment (Amendment) Plan of Import and Export Inspection and Quarantine Industrial Standard” which blueprints the new system and standards which will manage import/export inspection and quarantine. 11 standards are related to CBEC importation. The standard further details the implementation and enforcement measures. The estimated completion date for these new standards is December 13, 2017. The standard information is listed below:
Inspection and Quarantine Procedure Part 1 General Requirement
Inspection and Quarantine Procedure Part 2 Enterprise and Product Recording
Inspection and Quarantine Procedure Part 3 Quality Traceability and Enterprise Supervision
Inspection and Quarantine Procedure Part 4 Quality Supervision and Enforcement
Inspection and Quarantine Procedure Part 5 General Requirement for Data of Public Information Platform
Inspection and Quarantine Procedure Part 6 Building of Inspection and Quarantine Facilities
Measure for CBEC Supervision Directive
Measure for Filing Documentation of CBEC Operation Entity
Measure for Filing of CBEC Products
Measure for Filing Documentation of CBEC Operation Entity
Measure for CBEC Credit Data
In addition, similar to the GAC unified information system, the AQSIQ is also developing a unified information system. According to information disclosed on the AQSIQ website, the AQSIQ has authorized an IT company to develop a CBEC product inspection and quarantine supervision system starting in December 2016. To alleviate the heavy inspection burden, the authority will likely adopt a risk control and credit management based inspection plan. According to the project description, the supervision system will focus on managing the filing information of import and export enterprises involved in CBEC trade and products traded via the CBEC channel. The supervision data will contain a positive list, negative list, enterprise credit rating, supervision model, production risk rating, sampling/approval rate, alteration notice etc. More importantly, filing information will be used by all ports in the future.
Insights
Products imported via the CBEC channel previously enjoyed more flexible policies relating to taxation, Chinese labels, certificates and pre-market approval. The new policies will mean that CBEC will be aligned with general trade requirements. In addition to premarket approval requirements, CCEC and the positive list, AQSIQ will develop an information system which will require enterprises to file relevant information. Product traceability and enterprise credit management for CBEC are also likely to be implemented over the next several years.
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